Energy Prices and Carbon Taxes under Uncertainty about Global Warming

Franz Wirl

Environmental & Resource Economics, 2007, vol. 36, issue 3, 313-340

Abstract: This paper extends the strategic interactions between producers of fossil fuels concerned about their profits and a taxing government concerned about the consumers’ welfare for uncertainty: global warming follows an Itô -process. Stochasticity requires to differentiate between reversible and irreversible emissions in contrast to the deterministic version. The unconstrained (= reversible) case allows for a closed form solution but not the more realistic and constrained case. Nevertheless interesting analytical properties (e.g. about when to stop emissions, implicit conservation due to monopolistic supply) are derived and complemented by a numerical example. Copyright Springer Science+Business Media, Inc. 2007

Keywords: asymmetric; dynamic game; irreversibility; preemption; rent contest; stochastic; stock externalities; Q4; D81; C61; H23 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:36:y:2007:i:3:p:313-340

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DOI: 10.1007/s10640-006-9022-2

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